The water fund could be in trouble, here’s the numbers that show why


Can the City of Amsterdam continue to rely on $1.6 million transfers from the water fund to keep our taxes down while at the same time keeping water rates unchanged? Based on city budget numbers and past actual numbers, the answer appears to be no.

2020-2021 budget estimates

Revenue:   $5,939,011
Expenses: -$5,642,098
             $296,913 (surplus)

The proposed budget also includes appropriating $1.6 million from the water fund balance for the purpose of transferring it to the general fund.

It seems plain that the surplus will in no way compensate for the fund balance transfer. If actual expenses and revenues are close to projections, the water fund balance will decrease by approximately $1.3 million.

Where will that leave the fund’s balance at the end of the fiscal year? We can’t know for sure. The 2019-2020 fiscal year is not completed yet, and we can’t predict the future exactly. However, we can use past sources of information to create an informed estimate, starting with the last audited balance at the end of the 2018-2019 fiscal year.

2018-2019 Ending fund balance:   $2,411,901 (audited)
2019-2020 Budgeted surplus:       +$654,993
2019-2020 Budgeted transfer:    -$1,600,000
2019-2020 Ending fund balance:   $1,466,894 (estimated)
2020-2021 Budgeted surplus:       +$296,913
2020-2021 Budgeted transfer:    -$1,600,000
2020-2021 Ending fund balance:     $163,807 (estimated)

Obviously, the above numbers are an educated guess. However, as a reality check, I think it’s worth comparing the proposed and current fiscal year’s budgets to the 2018-2019 actual numbers, given that all three budgets use the same water rates, fund balance transfers, and all have similar estimated revenues and expenses.

2018-2019 Actual audited numbers

Beginning fund balance: $3,478,464
Revenues:               $5,583,774
Expenses:              -$5,050,337
Surplus:                 +$533,437
Transfer:              -$1,600,000
Ending fund balance:    $2,411,901

So that’s an actual $1,066,563 drop in fund balance in just one year under a budget very similar to the current budget and proposed budget.

If the above projection is accurate, it’s obvious the city will not be able to do another $1.6 million transfer in 2021-2022.

So is that the plan? Will there be new revenue sources to make up the difference when budget time in 2021 rolls around? Does the mayor, council, and controller understand the impact of three years of no increase in water rates? I wish I could say for sure. I’ve talked to Mayor Cinquanti and all I can say is my impression is that he’s under the impression that Controller Matt Agresta has assured him that the water fund revenues will cover both expenses and generate a surplus to replace the transfer.

I emailed Agresta on Wednesday asking for clarification, and as of 10am on Friday, I have not heard back from him.

City leaders need to recognize the future financial impact of keeping water rates at the same level for three years in a row. Either water rates are going to need to be increased, or nearly two million in new revenue or expense cuts need to be planned for next year.

Now some folks in Amsterdam might argue that we shouldn’t be using water fund surpluses to support general fund expenses. I’ve argued against that way of thinking before and you can read about it here.

Update: I received a response from Controller Agresta soon after this article was posted. He referenced my question to him asking to clarify if he reported to the mayor that the proposed budget would generate a surplus sufficient to cover the budget transfer. His response:

I was not privy to your conversations with the Mayor, but that was never my assertion. I stated that budgeting as we did for this upcoming year, if revenues and expenses stay in line with what is budgeted, then we would be left with a fund balance of between $800k and $1 million at the end of next fiscal year, conservatively.  That is a healthy figure for a $7 million dollar budget in the water fund.  With all of the deficits that have accumulated, the Water Fund has been our saving grace, but now that we have our deficit financing in place, there is no call to keep such sizeable fund balance in the Water fund going forward.

So there are two things to point out from this response. It’s odd that he says there is “no call” to keep a sizable fund balance in the water fund for the purposes of transferring those funds to the general fund to keep our taxes lower. Coming from the controller, it almost sounds like this is an objective financial statement. However, that’s far from the case. There is absolutely a “call” to increase revenues for the city. The issue of how much of a surplus to target with water fund rates is a matter of policy which there are different views on.

Secondly, it’s hard to understand how Agresta came up with a “conservative” projection of a $800,000 to $1 million ending fund balance for 2020-2021. I sent him my simple analysis that I posted here and asked him to kindly show me what I am missing. I’ll let you know what he says…

Tim Becker

Tim Becker is the owner of Anthem Websites Inc. which publishes The Compass. He serves as both editor and a writer.